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Foreign Exchange Considerations When Working in Southeast Asia

Different in culture, political structure and currency, the group of 10 member states known as the Association of Southeast Asian Nations (ASEAN) can present a complex business environment for importers and exporters. However, the ASEAN markets can also give an international business owner access to unique product offerings and a new customer base, so long as foreign exchange complexities and uncertainty are properly accounted for in these emerging markets.

Take Note of Economic Instability

Depending on their degree of economic and political stability, the 10 ASEAN countries are typically split up into two broad groups, says Dr. Jay P. Chandran, professor and chair of the International Business Department at Northwood University, Midland, Mich. The "advanced economies," known as the ASEAN-6, include Brunei Darussalam, Indonesia, Malaysia, the Philippines, Singapore and Thailand, he says. On the other hand, the "less advanced, volatile" ASEAN countries include Cambodia, Laos, Myanmar and Vietnam.

Since each of the ASEAN countries has its own monetary structure and foreign currency, the currency exchange process can be a bit more complex - and unpredictable - for international businesses. That's why Chandran advises business owners to practice due diligence when researching the economic and political stability of each emerging market, particularly the less advanced economies outside of the ASEAN-6. When assessing a market's risk, businesses should look out for extreme currency exchange rate volatility and high inflation, which can quickly diminish "the value of any transaction that you make," Chandran says.

“If you don’t have someone to help you understand how the [foreign exchange] markets work, then you don’t know how much you can potentially save.”

— Steven Hunter, head of small enterprises, Western Union Business Solutions

Practice Risk Management

When working in an ASEAN market, Chandran says that international business owners should be "mindful of the values of weak currencies," where economic instability can cause unpredictable fluctuations. One way that business owners can manage their risk exposure is by practicing hedging.

To guard against risk and quickly capture currency exchange rates at times when they're most favorable, a business owner can use the services of a trusted online foreign exchange provider. These services may offer a hedging tool known as bids, which can help secure immediate rates during overnight and early morning trading sessions, says Steven Hunter, head of small enterprises at Western Union Business Solutions.

Collaborate with a Trusted Third Party

When working across borders in ASEAN countries, especially in emerging markets outside of the ASEAN-6, Chandran strongly recommends that international businesses consult an expert from a reputable agency like the Export-Import Bank of the United States or the United States Agency for International Development (USAID), as these organizations can shed light on factors that can impact the process of trading or doing business in Southeast Asian markets.

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Businesses can also help their payments stay protected against adverse fluctuations by partnering with a trusted online foreign exchange provider to receive email market-rate alerts on the exchange rates of ASEAN foreign currencies, as well as complete visibility over the online wire transfer process. "If you don't have someone to help you understand how the [foreign exchange] markets work, then you don't know how much you can potentially save," Hunter says.

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